Long ago, Arrow and others noted that innovations do not meet the usual assumptions necessary for efficient decentralized production, hence the necessity of policies like patents or prize contests to rectify the market's inefficiency. Theoretical models exploring innovation policy tend to focus either on the amount of effort exerted on innovation, or on the extent of spillovers from one firm to another. We are interested not in how hard firms work, but on which types of projects they work. Using some neat tricks to make a very general model of innovation direction tractable, we show that every policy which rewards inventors and depends only on inventions that are actually seen will distort innovation direction. Patents, prizes, and laissez faire are all examples of such distortionary policies.

Open Access mandates are common among funders and universities, with the NIH mandate binding on over one-third of publications in top medical journals. Yet prior research has not found substantive measurable benefits from these mandates. We show that open access increases citation of medical research in patents by 25 to 50 percent, an effect measured using double and triple differences that take advantage of a 2008 NIH policy change. Further, we match academic papers to patents using the in-specification references in the actual writeup of the patent, and show that these references are actually very different from the types of references you see in the prior art section. We argue that in-specification references are more likely to measure "the paper trail of knowledge."

Open Access mandates are common among funders and universities, with the NIH mandate binding on over one-third of publications in top medical journals. Yet prior research has not found substantive measurable benefits from these mandates. We show that open access increases citation of medical research in patents by 25 to 50 percent, an effect measured using double and triple differences that take advantage of a 2008 NIH policy change. Further, we match academic papers to patents using the in-specification references in the actual writeup of the patent, and show that these references are actually very different from the types of references you see in the prior art section. We argue that in-specification references are more likely to measure "the paper trail of knowledge."

When successive monopolies price noncooperatively, the resulting double markup is higher than that a monopolist would choose, hence vertically related firms often merge to coordinate the markup, maximize joint profits, and improve overall welfare. None of this is true when downstream is an oligopoly, whether the upstream markup is chosen cooperatively or noncooperatively. Therefore, there is a need to complete our intuition on what double marginalization does in the non-monopoly setting. We show precisely when noncooperative double marginalization is profitable, note that cooperative double marginalization chooses an upstream markup such that the downstream firm has a "consistent conjecture" about the rival's response curve, and show that simultaneous cooperative double marginalization induces an approximation of the "consistent conjectures equilibrium" from the theory of conjectural variation even though all upstream and downstream firms are individually Nash agents.

Industrial Reversals of Fortune: The Meaning of Invention in the Early Airplane Industry

The Wright Brothers invented the airplane in 1903 in the US, but the airplane industry is dominated by European firms by 1914. What happened? An invention is a discrete technological step where a series of necessary components are sufficiently advanced to make a technological leap. By decomposing inventions in their components, it is possible to see how an "inventing" location to actually be a technological laggard. This was true of the airplane: Europeans even in 1903 were more advanced in essentially every area necessary for the later commercial airplane except for lateral control.

Coming shortly:
A Note on Local Envy-Freeness in the GSP Auction
A User's Guide to In-Specification Patent Citations

Other Publications

The Perils of Path Dependencein book Survive and Thrive (eds J. Gans and S. Kaplan) [September 2017]When technological development in an industry is critical, firms ought be wary of inadvertendly pushing their industry onto a less profitable technological path; an example from the Nuclear Power industry is given in detail

Contracts for Adaptive Programming (w/ P. Carter)
Overseas Development Institute Report [October 2016]The theory of dynamic mechanism design, particularly results developed in the past decade, can inform the design of contracts by development agencies who want to encourage their local partners to experiment with how to deliver policy.

The Evolution of City Population Density in the United States (w/ P.-D. Sarte & B. Minton)
FRB Richmond Economic Quarterly 93.4 [2007] | CodeNo matter how the concept is measured, population density has been falling in the United States since the early 20th century. This is true across regions, in new and old cities, in legal cities, and in urbanized areas.